Blockchain – A Revolutionary New Way to Stop Corruption in its Tracks, Everywhere!

You’ve probably heard of bitcoins, which are now, once again a hot topic. A US company (Coinbase) has just started up the first bitcoin credit card in the US, so I guess if it has a piece of plastic behind it, it must be good.

But bitcoin is getting to be old hat these days. The really hot ticket is the blockchain which is the technology model underlying bitcoins.

Essentially a blockchain is a distributed digital ledger of transactions. It’s kind of like a traditional financial statement, except that, instead of being based on a centralized record of transactions prepared by one party, it’s a decentralized record, prepared by as many parties as have been involved in all the transactions in the record.

As such it’s revolutionary. Instead of double-entry accounting prepared by a hallowed accountant of some description, it’s a transaction ledger prepared by all the involved members of John Q. Public. You can view it as being a kind of open-source accounting.

Now everyone can see the accounts and the details behind them. What’s more, every single transaction behind the record, or ledge, is visible. Now that’s a revolutionary idea.

It has rapidly become clear to many that the blockchain isn’t just for a new digital currency. It can be used for any human activity where we want to guarantee trust in any activity whatsoever, financial or otherwise. All the transactions will be wholly visible and transparent, no matter what their provenance.

So here’s my idea. Probably the most corrosive human activity impeding good governance everywhere in both the private and public sectors of every country is corruption. It pervades a huge amount of human activity. In most developing countries it’s the rule, not the exception and usually systemic. Even in developed countries it can be pervasive.

But all observers know that if there was some way to prevent it, it would revolutionize human affairs. It would result in money and resources being distributed more equitably and efficiently. At one stroke it would lift billions out of poverty.

So why not introduce blockchain accounting into the public and private sectors of all countries? If you did it in the public sectors, there would be a public record of all financial transactions made by the government. And since it’s a publicly maintained ledger, you wouldn’t have to rely on people you might not be able to trust such as politicians, officials, accountants and lawyers. So you could finally guarantee clean government.

And if you did it in the private sectors you could also guarantee that big companies were not cheating their investors and shareholders, not to mention their customers. Maybe you could start off with public companies first, since their public structure is already supposed to lead to transparency and open-ness. The blockchain ledgers could be maintained by suppliers and customers who would enter their buying and selling transactions into the public blockchain instead of relying on the company’s accountants to do it. This is corporate governance 3.0 with a vengeance.

Guess what? There’s another big benefit of open-source accounting. If you use the blockchain, you don’t need formal compliance mechanisms. Compliance is built into the very structure of the financial and accounting system. So at a single blow, you could abolish the whole massive bureaucracy of both government and private compliance organizations. Imagine life without the SEC, if you dare!

Imagine being able to track every payment under social security or government healthcare – to veterans for example. Examine all the payments to suppliers and intermediaries for those programs. Worried about privacy? No need! All transactions can be anonymized so that only when fraud is found do you need to know the beneficiary.

And guess what? Now you have a way of tracking down money laundering to crime, terrorists and government officials everywhere. You can match blockchain ledgers with transaction records of the financial institutions. At a stroke there goes the mafia, drug kingpins and white collar criminals!

There are a number of well-meaning global nonprofits that are devoted to monitoring corruption in governments and private organizations. Transparency International is one of the best-known. These are good people who are well-meaning who take a lot of risk to do what they are doing. Introducing the blockchain approach to their activities could result in a quantum impact in their effectiveness. That could force political and economic change globally in a way that has never yet been seen.

And for those governments that also want to stop corruption, the blockchain provides them with an unprecedented tool. By introducing it they could stretch their own limited resources massively by releasing resources that would otherwise disappear into the pockets of the world’s criminals.

And the blockchain could provide a radical new approach to cybercrime. It would enable organizations to prevent cybercriminals from reaping the rewards of their criminal endeavors and thus halt a lot of their attacks at the source.

Blockchain has the potential to have massive revolutionary and global impacts. In this particular area, bitcoin is just a bit player. Let’s hope that the right people will take up this incredible challenge.

About the author

Dr. E. Ted Prince is CEO and Founder of the Perth Leadership Institute, which has developed unique leadership assessments for financial leadership and business acumen. He is the author of The Three Financial Styles of Very Successful Leaders, published by McGraw Hill in 2005 and since published in China, India and Taiwan and Business Personality and Leadership Success: Using the Leadership Cockpit to Improve Your Career and Company Outcome published by Amazon Kindle in 2011. He has numerous publications in the area of leadership, management, human resources, business strategy and technology and is a frequent speaker at industry conferences. He has held the positions of Visiting Lecturer at the University of Florida and Visiting Professor at the Shanghai University of Finance and Economics.
Dr. Prince has been CEO of several companies in the technology area over a period of 20 years including Chairman and CEO of a public company for 6 years. He has also been on the boards of numerous other companies including several public companies.
Dr. Prince holds a BA First Class Honors degree in languages and political science from the University of New South Wales in Sydney, Australia, and MA and Ph.D., degrees in political science from Monash University in Melbourne, Australia.